GE's Giant Deal

Ever since the 1973 oil embargo, once plain-looking companies that produced coal and other natural resources have been eagerly pursued as merger partners. Oil companies in particular have been looking them over as a means of getting in on the development of alternative sources of energy.

Last week General Electric Co., the U.S.'s largest electrical-equipment manufacturer, joined the trend. G.E. announced that it plans to acquire Utah International Inc., a large but little-known San Francisco-based mining company (1974 sales: $500 million) that has extensive reserves of coal, uranium and other natural resources in the U.S. and abroad. GE plans to pay about $ 1.9 billion in stock for Utah International.

The driving force behind the merger was Fred Borch's successor as GE chairman, Reginald Jones, 58. Jones has had to deal with a profit slump at GE. The company's net earnings fell 14% in the first nine months of this year after reaching a record $608 million in 1974. One reason is that GE has been losing money on fixed-price orders for atomic power plants; lead times on such projects are long and cost overruns can be breathtakingly high. Jones says that GE sees Utah as "an important opportunity in the natural-resources industry." Some Wall Street analysts believe that the company may be particularly interested in Utah's uranium mining and processing operations. The merger with Utah would enhance GE's ability to sell profitable "turnkey" deals covering everything from the reactor to the atomic fuel to power-company customers.

On Wall Street, shares of both GE and Utah scarcely moved following the merger announcement, mainly because investment professionals doubt that the deal will go through. Government trustbusters are almost certain to study the merger plan carefully to see if it might give GE an unfair advantage over other domestic manufacturers of power plant equipment. If the Justice Department or the Federal Trade Commission decides to challenge the merger, it would underscore a long-building conflict between the nation's antitrust policy and its international economic interests. Reason: a thoroughly integrated energy giant may well be exactly what the U.S. needs to battle effectively for overseas orders against Japanese and other government-supported competitors.

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